Compliance consultants advise businesses and companies on complying with government, professional, and safety regulations. Their work is sensitive because they must ensure that all business procedures and processes of their clients comply with laws and regulations. Compliance consultants also ensure that their client's operations comply with internal standard operating procedures. Without a compliance consultant, businesses could be exposed to potential damages and fines if they violate laws.
Given the serious nature of compliance consulting, whether a consulting firm or an individual practitioner, insurance for compliance consultants is a must. Mistakes may cause financial losses for the company, leading to a devastating lawsuit against the consultant. It can also jeopardize a person's career and damage a thriving business of a compliance firm. Insurance for compliance consultants can protect companies and individuals from legal expenses, damages incurred for causing their clients' financial loss, injuries, property damages, and other unexpected costs.
Risks and Liabilities of Compliance Consultants
The business and its employees are exposed to several risks and liabilities in compliance consulting.
- For instance, a compliance consultant may describe a listed company's information incorrectly in disclaimers used in external communication, which could result in the company falling into legal trouble.
- A situation in which a consultant gives incorrect advice to a client, includes discharging pollutants from a factory near the city and violating environmental rules. That may lead to the government slapping a hefty fine on the client company. The client company can sue the consultant for incorrect advice and the fines that the client had to pay.
- Hospitals do not always have security protocols or procedural reviews to keep patient information confidential. Compliance consultants may be held responsible if a patient's critical data is disclosed outside.
- A pharmaceutical company that does not follow appropriate written standard operating procedures for the compounding of drugs may be in trouble with regulators. The company can sue compliance consultants for not catching the company's mistake.
- Foreign matter detected in chocolates by customers can cause legal and financial trouble for the chocolate manufacturing company. This type of incident could wreak havoc with the US Food and Drug Administration shutting down the business. The client company can file a large lawsuit against compliance consultants for the crisis.
So you see, there is a need to buy insurance to help the business sail through such financial setbacks.
Recommended Coverage for Compliance Consultants
There are many types of coverage that would benefit Compliance Consulting firms. Some of these include:
Professional liability insurance for compliance consultants
Also known as "errors and omissions insurance," this policy protects against any legal expenses if a client sues over unsatisfactory work, errors, negligence, or mistakes at work. A small mistake by a consulting firm can cause a huge financial setback for the client and damage their reputation. The client can file an expensive lawsuit against the consulting firm. Professional liability insurance offers coverage related to work mistakes, undelivered services, and accusations of negligence.
Clients want to know whether the consulting firm has the right coverage for any harm caused by the consultant's neglect. Indemnity is the foundation of most business insurance policies. It is a commitment between the insurer and the consulting firm wherein the insurer will compensate the harmed party for covered losses during the policy period. In the case of professional liability, the insurer pays for the policyholder's legal liability for negligence in providing the service.
It's important to note that Professional Liability does not pay for physical bodily injury or property damage caused by the consulting company, General Liability is available for these types of claims.
Fidelity bonds for compliance consultants
Fidelity bonds provide reimbursement to the employer if one of the employees steals from the client or the employer. Often referred to as employee dishonesty or crime, these bonds provide coverage if an employee commits theft or fraud, electronic funds transfer, or unlawful data access from within a compliance consultancy firm.
However, unlike insurance, Surety companies that pay claims under this coverage would then pursue reimbursement from the employee that committed the crime. Fidelity bonds provide both first-party and third-party coverage. First-party fidelity bonds provide coverage if an employee steals from their own company. In contrast, third-party fidelity bonds provide coverage if employees steal from clients.
General liability insurance
This policy provides coverage for common risks such as bodily injury, damage to others' property, and personal and advertising injury. For instance, if one of the employees accidentally damages a client's property, the consulting firm could be held liable. The General Liability carrier would respond to this third-party property damage claim.
General liability insurance provides coverage for legal expenses and expenses for repairing or replacing damaged property. There could also be a slip-and-fall accident involving a client at the office. This insurance will pay for the client's damages from medical costs, lost work, and suffering from the injury.
Business Owner's Policy for compliance consultants
A business owner's policy (BOP) is economical and provides comprehensive coverage for compliance consultants. It combines both general liability insurance and commercial property insurance. A BOP will pay for damages or replacement of office structures, contents, and equipment in case of a fire, wind damage, or theft, among other covered perils. General liability will also provide coverage against customer injuries and property damage, slander, and advertising injuries.
The BOP policy comes in handy for paying medical bills if someone gets physically hurt at your office. If a client slips on the wet floor in the bathroom and breaks their elbow, they then sue your firm, the general liability handles it. In the event of a fallen laptop, this policy will help pay for the repair or the replacement of the laptop. In most cases, a business is eligible for getting a BOP if it has less than 100 employees, has a small office, has a revenue of less than $1 million, and operates in a low-risk industry. The eligibility guidelines vary for each insurance company. If not eligible for a BOP, you can get a Commercial Package Policy which will also provide both Property and General Liability insurance.
Cyber liability insurance for compliance consultants
Cyber insurance pays to defend liability claims or suits from clients whose data was breached or harmed from some other cyber-attack. It saves the business from the financial burden of defending itself in case sensitive data gets stolen, such as clients' social security numbers, credit card numbers, and personal details.
The cyber liability insurance for compliance consultants includes first-party and third-party cyber insurance. First-party cyber insurance provides coverage for your business losses from damage to networks, computers, fines, and loss of income resulting from a cyber-incident. These policies are highly customized, so ensure you get the coverage your business would need in case of data breach coverage at your compliance consultancy business.
Worker's compensation insurance for compliance consultants
This type of insurance is required in most states for consulting firms with several employees. This insurance protects business owners from the work injury costs of employees. It pays for missed wages when employees cannot work, lawsuits over injuries, funeral expenses in case of fatal accidents, and employee medical costs.
Cost of Insurance for Compliance Consultants
A variety of factors contribute to the cost of insurance for compliance consultants, including:
- Type of consulting services offered
- Business equipment and property
- Business income
- Location
- Number of employees
Summing up
Having insurance for compliance consultants is a must considering the delicate nature of their work. A single mistake can cost clients millions of dollars, which could lead to lawsuits against consultants.
Therefore, insurance provides a cushion to overcome such unexpected shocks smoothly, giving peace of mind. However, when choosing a policy, thoroughly read all the features, terms, and conditions and then arrive at a decision. Consider enlisting the help of a licensed insurance agent or visiting Insurance Advisor for more information.